Globalisation is the topic for our asset management CEO roundtable this year. What does the increasing importance of clients in new and emerging markets mean for investment management businesses? Chief executive officers discuss implications for brand, service quality, and business models.
But they also continue to engage with the challenges posed by the ‘shifting pendulum’ of East/West economic change, and with the wave of regulation that still burdens the industry.
Participants:
Alain Dromer (chief executive, Aviva Investors)
Greg Ehret (head of Emea, State Street Global Advisors)
Crispin Henderson (chief executive officer, Threadneedle Investments)
Andrew Laing (deputy chief executive, Aberdeen Asset Management)
Alan Mearns (chief executive, BNY Mellon Asset Management International)
Akshay Randeva (director, strategic development, Qatar Financial Centre Authority)
Keith Skeoch (chief executive, Standard Life Investments)
Alain Dromer (Aviva Investors), Greg Ehret (State Street GA), Crispin Henderson (Threadneedle Investments)
Andrew Laing (Aberdeen Asset Management), Alan Mearns ( BNY Mellon AM International)
Akshay Randeva (QFCA), Keith Skeoch (Standard Life Investments)
Funds Europe: As asset managers develop global businesses, how important are their brands in these new and emerging markets? Do other options exist for building business rather than developing brands individually in Asia, Latin America, and the Middle East and North Africa (Mena) to access different client segments, such as retail and institutional?
Alan Mearns, BNY Mellon: Establishing an international brand is about establishing a reputation that can help transport your expertise and build the awareness of your business into a particular market. It then becomes critical that the local reputation you establish forms the core of your brand promise in that market.
Crispin Henderson, Threadneedle Investments: The heritage of any global brand stems from its success in its domestic market. Global markets divide between the 70% of assets in Europe and the United States, and the 30% in emerging markets. What’s interesting is that the 70% is still growing – but it’s not going to grow anything like the way the 30% will grow. In that sense, because emerging markets have always been very consumerist-led, an emerging markets brand is very important.
Greg Ehret, State Street: Most people associate branding with advertising, but branding in asset management is actually about establishing yourself as a fiduciary. You can’t just put an advertisement out there and suddenly be a fiduciary; you have to develop trusting relationships with your clients, which can take years.
Keith Skeoch, Standard Life Investments: Brands in asset management are earned, not manufactured. You can’t manufacture trust and fiduciary responsibility. Building a global brand is about working out how far your brand and your franchise will travel without undermining the core elements that have earned you the respect of your clients.
Alain Dromer, Aviva Investors: When you are part of a large group and carrying the brand of that group, it’s not something you are going to forget about. It’s about continuing to deliver on the promise and making sure standards are the same in all countries in which you operate. Therefore, we need to have the right compliance, the right discipline, the right risk management and control systems and, most importantly, the same culture.
Andrew Laing, Aberdeen Asset Management: Yes, and particularly so on the investment side. You have to stand for something cohesive in order to establish a brand. It has to represent a part of your investment process that is visible and easy
to identify.
Henderson: The historic way in which new markets have been opened up by asset managers has been for the manager to take top-performing global products into emerging markets and sell them firstly to institutions.
This was followed by the establishment of a local manufacturing capability, which then played a role in global investing and a very strong role in local investing. The other is via joint venture. That requires establishing a relationship with somebody who works and thinks like you do.
Skeoch: There is no one-size-fits-all model, and it depends on the local infrastructure and the local regulatory environment. Where there are accessible platforms, some markets can be entered by investment managers as a wholesale brand directly. There are other markets where a very tight partnership is needed instead. This is the case with the more customer-focused markets.
Dromer: Asia at large, and Latin America, are perceived as markets where there are a lot of opportunities, both institutional and retail. Mena is more a market that is known for large institutions that you can access from abroad, or from a very small foothold in the region.
Ehret: And it’s still one country at a time; Asia’s not one place, nor is Latin America, or anywhere else.
Ashkay Randeva, Qatar Financial Centre Authority: Each region – from India, South East Asia and China, to Latin America, the GCC [the Gulf Co-operation Council] and wider Mena region – has its own very different characteristics. In order to be there in the long term, you have to think long-term. In 20 years’ time, we wouldn’t want someone to think, “What were my predecessors thinking in 2010?” I’m not sure that pure name or brand recognition will do, at least across the GCC where we are seeing increasingly that institutional investors are beginning to push for a local presence.
Mearns: We find that having a local presence in the markets and working closely with institutions and distributors, is key to really understanding local trends. The more in touch you are with market developments, the more successful you are going to be in the longer term.
Laing: It’s essentially a business of trust and you can’t achieve trust overnight. It requires personal contact, it requires relationships. Apart from anything else, we find the logistics of flying people continually around the world don’t stack up, you do have to have strong regional hubs.
Funds Europe: How can asset managers with global operations ensure the same standards of client service everywhere? As businesses expand globally, do you become more reliant on outsourcing providers? And has that business relationship with providers changed?
Laing: We’ve spent a lot of time getting rid of legacy systems and trying to have a genuinely global platform, which facilitates that. People are also critical, so it is important to ensure
the right kind of training is on-site. We rotate staff around the different offices to try and ensure a similar standard of approach in each of our locations.
Dromer: For us, it is about centralisation. In some respects we are not like consumer brands, but we can borrow approaches from some of the other sectors. For instance, an end-to-end experience is something that we really try to implement and translate around the world.
Henderson: It has been vitally important for us to identify people in our emerging markets who espouse the same kind of culture that we do and we have found it easier to recruit local people who have been hugely successful in the financial services business. For example, our chairman of Asia Pacific, Raymundo Yu, is a 30-year seasoned professional, who ran Merrill Lynch Private Bank with 8,000 people.
Mearns: Having local people who understand client needs, who can understand the nuances of what the clients want, matched with great global investment products, are what makes the whole thing come together. Reputation, brand and client relationships become completely interconnected.
Skeoch: In terms of outsourcing providers, the nature of the relationship changes, but what’s common throughout is a sense of partnership based on shared values. We are all trying to improve relationships, we’re all trying to ensure that we maintain and extend the relationship with clients through high-quality delivery of service.
Henderson: In our case, it’s very obvious that if you’re working with back-office outsourcers, then your outsourcer has to have the same kind of global capability and, like us, wants to work to a single standard across geographies.
Laing: It’s also vital that when you are setting up any outsourcing arrangement that you identify the client contact points very clearly and try at all times to keep as much contact with the client yourself as possible.
Funds Europe: What form should a local presence take? What if you’re an asset manager offering, say, a Latin American equities product to a Middle Eastern institution, to what extent would you have to have an on-the-ground presence in the Middle East? Would it not be better for the asset manager to be in Latin America?
Mearns: It is important to have local servicing, but the local servicing teams are then able to bring in the Latin American business. The large, very investment savvy sovereign agencies are prepared to work with businesses that don’t have a presence locally, but this, in our experience, is not their preference.
Laing: If you’re selling Latin American equities, they would expect you to have a Latin American speciality on the ground.
Ehret: Just having a bunch of investment centres all over the world doesn’t mean you’re going to drive consistency in your organisation or your process. The local presence certainly has to be there from a client perspective, but do you always have to have a local presence from an investment perspective? Well, if you do, it has to really make sense and you have to be able to scale it.
Laing: One of the things we find, which is an immensely strong argument, is when you can legitimately say that you do exactly the same thing in all locations with the same process, style, approach and systems, it helps give continuity to your investment philosophy.
Henderson: We espouse that same approach; it gives you consistency and supports the brand.
Skeoch: We take a slightly different view. If you’re running global money it might be better to have it in a central core so that you don’t have to go round and get the view from lots and lots of fund managers. What has to be worked out are what your competitive advantages are, what your offer is to clients, and what the mandate is.
Ehret: We want to keep our client relationships as close as possible. Disintermediating with anybody puts us on the road to losing that client.
Skeoch: Yes. It isn’t about service, it’s about relationships. It’s only when you have a strong relationship that you will find out about the true quality of your service. It’s better for finding out quickly where failings are, because then you get the chance to fix them sooner.
Funds Europe: Are there ‘political’ considerations when choosing between competing jurisdictions, such as Dubai and Qatar in the Middle East, or Hong Kong and Singapore in Asia? Both jurisdictions may be important for business development, but both may also expect an on-the-ground commitment.
Laing: If you’re looking purely at distribution, clearly there is an issue as to where you will locate yourself to maximise your reach, but also to minimise any damage to competing countries. It’s an issue any global company considers when they open in a location. And the other issue that occasionally arises is which city in a particular region will you locate in? Latin America is a good example of that; precisely where you go is not always obvious.
Henderson: It’s very clear that in emerging market countries there has been a lot of influx, and this comes back to the point of long-term commitment. I’ve watched lots of players come and go. We are very thoughtful before we commit to putting resources into a country, we want to be absolutely sure that that’s it, we’re not going to leave, and unless you can be confident in that, I think there’s some danger.
Dromer: In Asia, competition between Singapore and Hong Kong is clear; when you are based in one jurisdiction, you struggle with the other’s regulator.
End of part 1
©2011 funds europe
